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DD Consultus is attending the Dubai International Blockchain Summit, taking place now at the Atlantis Hotel in Dubai. The event is hosting over 5000 delegates.

On 4 July 2018, Malta officially passed three bills into law which establishes it as one of the first countries to enact a regulatory framework for blockchain technologies and cryptocurrency. While other nations have decided to wait for a tried-and-tested legal framework to base their regulations on, Malta has pioneered legislation into the industry to make them the biggest name in blockchain and cryptocurrency technology. As shown by the new laws, this move has been made to make Malta a hotspot for the industry. It is a huge move from the small nation, earning it the title of the ‘World’s First Blockchain Island,’ and it is expected to have many repercussions in Malta and across the world.

A new age is dawning
Bitcoin, the world’s first cryptocurrency, found recognition among the general public in the second half of 2017 when its price ascended rapidly from close to $1000 to over $19,000. However, people have known of the cryptocurrency for a long time; and while some may not have bought into the ideology of a decentralised digital currency, experts saw the potential buried in Bitcoin’s foundations.
The blockchain, which is a public transaction ledger that is managed by a peer-to-peer network, records everything that happens in the Bitcoin network and stores the records in a way that cannot be copied or altered. It was built to stop the possibility of double-spending the cryptocurrency, and it also built unequivocal trust within the network without the need for a central authority. Blockchain technology may have first been used for Bitcoin, but its applications are far spreading beyond cryptocurrencies. It could allow the media industries to limit a single copy of a song or movie to a single purchaser, or be used in all forms of business in the form of Etherium’s self-executing contracts. If it is allowed to, blockchain technology could change the way that day-to-day activities are performed. But to do that, companies in the industry will need assurances.

Malta steps forth to inspire blockchain advances
Malta made history with the three bills that it enacted as the regulatory framework for cryptocurrency and blockchain technologies, becoming the first world jurisdiction to provide the industry with legal certainty. Other jurisdictions have passed laws on cryptocurrencies and blockchains, but Malta’s regulations are the most detailed and comprehensive, delivering true certainty. The EU member has been keen to innovate and govern online industries, with the Maltese Gaming Authority being one of the most trusted regulators in the online gaming industry. Now, Malta has become a regulated haven for companies in the industry.
The primary purposes of the three bills are three-fold: to provide legal certainty for the first time in the industry; to support the growth of the increasingly important industry; to guide the government on how to embrace blockchain and cryptocurrency technology and forge Malta into an industry hotspot.
Now in power and governing the industry’s actions in Malta are the Innovative Technology Arrangement and Services Act (ITAS), the Malta Digital Innovation Authority Act (MDIA), and the Virtual Financial Assets Act (VFA). Herein, blockchain technology is referred to as distributed ledger technology (DLT), while a cryptocurrency is termed as a DLT asset. The purposes of each bill are as follows:
ITAS: Primarily concerns the establishment of exchanges and companies based within the cryptocurrency market. It details the registration and certification of DLTs and provides technological arrangements for companies.
MDIA: This bill establishes the MDIA as the regulatory body and formalises the internal regulatory procedures for the industry. As the regulator, the MDIA is also tasked with providing legal certainty to potential DLT platform users.
VFA: The third bill regulates initial coin offerings, forcing new companies seeking to raise capital through an ICO to publish detailed white papers and make their financial history public. The VFA also governs cryptocurrency exchanges and wallet providers.
The three bills have been brought in by Malta to allow a safe place for the industry to grow, but they also ensure that potential users are protected under the new laws. The new legislation prohibits market manipulation, insider trading, and misleading white papers. ICOs in the industry have been accused of such foul play in the past, so Malta has decided to prohibit it without question. A person found guilty of such offences can face: a fine of up to $15,000,000 or three-times the losses avoided or profits made due to committing the offence, whichever is greater; incarceration for a term of up to six years; or suffer imprisonment and a fine. These staunch punishments will help Malta to legitimise the industry while also nurturing it as it grows to meet its immense potential.

The impact on Malta and the rest of the world
The desire to create the bills first was to help present Malta as a blockchain hotspot: the nation is already bearing the fruits of its bravery. Binance, the largest cryptocurrency exchange in the world, has already opened up an office in Malta, and OKEx has also followed suit. The Maltese government has investigated various ways to implement blockchain technology into public services, while the MGA sees the technology as a way to regulate online gaming services looking to accept cryptocurrency payments. They also plan to explore its applications alongside games, as it could provide transparency by proving the fairness of games via operators’ use of DLT.
Malta’s new regulations could also work as the much-desired framework for legislation in other nations. In the USA, investors have encountered frustration when trying to invest in certain ICOs, due to government accreditation being required for ICOs that offer securities. Malta’s VFA can assist with this issue as The Financial Instrument Test within the VFA details a three-step method to decipher whether an ICO’s asset could be deemed a virtual token.
Malta has opened as the world’s first regulated jurisdiction for blockchain and cryptocurrency technology. The favourable and clear-cut legislation will attract many of the biggest names in the industry to the island nation which will, in turn, provide a haven for the potentially world-changing industry to develop.

The lack of legal action has created uncertainty
Blockchain is being hailed as the greatest invention since the internet. Despite this, there is a great deal of variance in the regulation of the technology across the world. In the United States of America, blockchain technology has been mentioned as potentially being able to change how security is upheld during transactions online. Despite this, the US federal government has left the states to their own devices for regulating blockchain technology, which has resulted in at least eight states working on bills to accept or promote the use of the blockchain technology or the cryptocurrency Bitcoin, as of 2017.
In Europe, there is a more positive, active, and welcoming approach being taken to regulating blockchains and cryptocurrencies. Earlier in 2018, the European Commission revealed its planned vehicle to exchange expertise for the launch of blockchain applications across the European Union, known as the European Blockchain Partnership.
The issues that many jurisdictions have encountered when seeking to regulate the industry are defining the uses of blockchain, understanding what cryptocurrencies and blockchains are, and the willingness to commit and give the technology a stamp of approval. The industry has also come under scrutiny concerning the legality of cryptocurrencies. Some have disputed that cryptocurrency does not constitute legal tender, which brings about a lot of uncertainty in many areas of the world for the companies.
In research committed by Malta, one of the main concerns brought up by those in the industry was the legal uncertainty in many jurisdictions and the fear that their activities could be deemed unlawful at any time. The serious operators sought legal certainty above all else.

by Denitza Dimitrova
LL.B., LL.M., Mag.Jur.

On May 14, 2018, the Supreme Court of the United States overturned the Professional and Amateur Sports Protection Act (PASPA). This action was taken after the state of New Jersey sued PASPA in the case of Murphy v. National Collegiate Athletic Association, claiming that the law infringed the Tenth Amendment of the United States Constitution.
Following the revocation of PASPA by the Supreme Court, sports betting can now be legalised in the United States of America. Attention now turns to the individual states while they dictate as to whether or not betting on sports becomes an available and legalised activity under their jurisdiction.

Why was PASPA in breach?
The Professional and Amateur Sports Protection Act, enacted in 1992, did not make sports betting illegal as sports betting was already outlawed. With the exception of the state of Nevada as well as Delaware, Oregon, and Montana in part, PASPA stopped states from creating laws that regulated and taxed sports betting. Preventing states from making law infringes the Tenth Amendment; thus the Supreme Court opted to repeal PASPA following a six to three majority decision.

What does PASPA’s revocation mean?
With PASPA gone, states are now able to create laws that legalise and regulate sports betting. It does not automatically mean that betting on sports is now legal; PASPA’s repeal is merely the first step towards legalisation.
In the running to the Supreme Court’s decision, 18 states reportedly started to introduce legislation to legalise sports betting, including Delaware, New Jersey, and West Virginia. PASPA’s repeal only grants states the opportunity to legalise sports betting. As it is voluntary, not all states will create sports betting statutes immediately, or even at all. Thus, sports betting may never become a legalised activity throughout the USA, as is the case with the recreational and prescribed use of specific psychoactive drugs.
As for betting operators, a truly free market does not appear the way that states are heading. Although the markets are expected to be very lucrative, states that are making the first moves to legalise betting have proposed limited licensing structures.
It is estimated that around $150 billion was wagered on sports in the USA each year while PASPA was in power: 97 per cent of which was bet illegally. Now, estimates for a legalised sports betting market in the USA range between $57 billion and $400 billion per year.
As states will regulate which operators can offer betting services under their jurisdiction, potential bettors within those states will benefit from a protected betting environment that is safe, regulated, legal, and protects wagers. This safety net will increase the popularity of sports betting which, up until now, has been overruled by deviancy in the USA.

What does it mean for a state to legalise sports betting?
States passing legislation to legalise sports betting are expected to establish many regulations which operators must comply with before they can offer their services to the people of that state. Once operators comply, they will be able to offer their services within the state, but to no one outside of that state.
One of the most pertinent statutes stopping the USA from allowing all of its residents to engage in sports betting is the Interstate Wire Act of 1961. Also known as the Federal Wire Act, this law prohibits interstate sports wagering via telephone or the internet. The Federal Wire Act does, however, allow the placing of bets on a sporting event from a state where betting on sport is legal into a state where it is also legal. To avoid infringing this statue, operators may utilise geo-location technology to ensure that their services are not available to those residing outside of the confines of a legalised state.
As of June 5th, Delaware became the first new state to offer sports betting, with three locations open for business.
Other states like West Virginia and New Jersey seek to have a full-scale offering in place while Delaware will continue to grow from these three locations. The Diamond State already has the necessary legal and regulatory authority to build a full-scale gambling operation.

Potential bumps along the road
While the market is predicted to be very lucrative, some operators may choose to not enter into certain state markets due to the new laws and regulations enacted. A proposal in Pennsylvania penned a one-time license fee of as much as $10 million along with up to a 34 per cent tax on gross receipts. As the legalisation of sports betting is going to be regulated by each state individually, some states are expected to begin as hotspots for operators.
New federal legislation may also prove to be a problem as, in theory, federal law could step in to stop sports betting before it properly begins. One of the four authors of PASPA, Senator Orrin Hatch (R-Utah), has announced that he will introduce new legislation that will protect honesty and principle in the athletic arena. But, some predict that federal legislation will not arrive until after the mid-term elections.
Another potential issue is that the NBA and MLB are trying to claim a 1 per cent sports integrity fee from bookmakers. If this were to come to fruition, many operators would see the market as a non-starter. The majority of sportsbooks only keep around 5 per cent of wagers. This integrity fee would also limit the amount of tax revenue that states could earn. However, Nevada avoiding such a fee for decades should set a precedent.
It is still early in the story of the legalisation of sports betting in the USA, and much could infringe the popular gambling activity from establishing itself across the nation. While many states are embracing the chance to allow sports betting under their jurisdiction, with Delaware being the first new state to do so, it seems very unlikely that every state in the USA will legalise and host sports betting services anytime soon.

by Denitza Dimitrova
LL.B., LL.M., Mag.Jur.

Sweden has been a grey market in the modern age of online gambling, and yet the nation has spawned some of the biggest names in the industry. As of 1 January 2019, however, Sweden will become a fully regulated market following the aptly named bill ‘A Re-Regulated Gambling Market’ being approved by national legislature Riksdag.
In the past, Sweden has been staunchly against liberalising its market away from the state-owned monopoly, despite the numerous formal letters delivered by the European Council. Sweden now opts to make changes to its laws to not only comply with Article 49 of the European Commission Treaty, which guarantees the free movement of services, but to also regain control of its gaming market. It has been a long and hard-fought war between Sweden and the European Commission, but the new policies and systems being brought in with the new laws will see them ultimately win their crusade and maintain the principles that they have been trying to defend.

A tyrannous monopoly
Up until 1 January 2019, the two main statutes that have governed gambling in Sweden have been the Lotteries Act (1994) Lotterilagen and the Casinos Act (1999) Kasinolag. The Lotteries Act made it illegal to promote gambling services that had not been licensed by Sweden. The Gaming Board of Sweden has had the responsibility of licensing and suspending gambling services, as well as, monitoring compliance with the Casinos Act and Lotteries Act. Since 1997, Sweden’s gaming scene has been ruled by the state-owned monopoly of Svenska Spel and AB Trav och Galopp (ATG) as the only two operators to receive a license to offer gambling services.
Over the years, the Gaming Board of Sweden has upheld the two ruling statutes diligently, and the Swedish courts have also been staunch advocates at every turn. In 2005, the Swedish Supreme Administrative Court did not overturn the Swedish government’s decision not to approve Ladbrokes’ application to establish betting operations in the country. Ladbrokes also came under scrutiny following their placed advertisement in daily Swedish newspaper Aftonbladet, which the Gaming Board of Sweden reported to the police to have removed. In 2006, the Gaming Board of Sweden reported the editors of newspapers Metro and Expressen, as well as, editors at magazines Slitz and Spray for the publication of advertisements for unlicensed gambling operators.

Sweden’s resilience to the European Commission’s advances
In October 2004, the European Commission sent a formal notice stating that monopolies in the nation’s gambling market can only exist if they have the objective of limiting betting opportunities in the country and do so in a systematic manner. Sweden ultimately upheld their gambling laws to be in line with the European Commission. In June 2007, the European Commission sent a formal notice requesting Sweden to amend their gambling laws. Sweden ruled to refuse to grant non-Swedish operators a license to operate in Sweden in August 2007. It decided that it must uphold the nation’s law in order to counter criminal activity and maintain social security.
In June 2012, the Swedish National Audit Office reviewed the government’s gambling laws with a particular focus on whether or not they had achieved the goals originally used to rationalise the establishment of a monopoly. Sweden initially restricted private operators to maintain public order, prevent crime, and limit addiction. It was all put in place to promote the safety of the Swedish public via the use of Swedish-operated services. However, the Swedish National Audit Office found that Sweden was in danger of seeing a rise in pathological gambling. They called for more coherent legislation to take the place of the Lotteries Act and Casinos Act as well as introducing precise license terms and giving new powers to a regulatory authority.
The European Commission brought another action against Sweden in November 2013, stating that their exclusive right to offer services in the market does conflict with Article 49 of the European Commission Treaty. Sweden’s reactions to the Commission’s requests were not deemed to be satisfactory in October 2014, so the Commission referred Sweden to the Court of Justice of the European Union. Finally, on 24 September 2015, Sweden’s Minister of Public Administration Ardalan Shekarabi announced that the government would investigate the abolition of its gaming monopoly and in its place, introduce a Swedish licensing system.

2019: A new Swedish market
Following the acceptance of the bill ‘A Re-Regulated Gambling Market’, Sweden is set to have a liberalised gaming regime as of 1 January 2019, which will allow international operators to apply to offer their services in Sweden. The country shall be open for license applications to the Swedish Gaming Authority as of 1 August 2018.
Online sports betting, bingo, casino, and other digital products are open to those applicants who qualify for a license. Sweden does, however, reserve control over all land-based casinos, major lotteries, and gaming machines outside of land-based casinos. Operators can apply for a license of up to five years in longevity, and there will be an 18 per cent tax on gaming revenue. The operators must also have their servers based in Sweden, but exceptions can be made provided the operator commits to Sweden’s inspection policies, and the location is deemed acceptable.
The two primary focuses of the new statute are player safety and the punishment of unlicensed operators. To ensure customer protection, all online players must be required to set deposit limits and be able to block themselves from all gambling activities. Also, operators cannot offer players credit, nor can they offer bonus offers outside of the first-time new customer offer. The legal age of gambling at an online casino is 18-years-old. With this, operators are not allowed for their sponsorship of a sports team, such as a logo or slogan, to appear on products that are intended for minors, such as youth-sized football shirts.
The regulatory body Lotteriinspektionen can compel internet providers to mark unauthorised gambling websites, as well as, require financial institutions to block payments to and from websites. The Swedish Gambling Authority has been given sharper tools to deal with unlicensed operators. Unlicensed operators will be shut out of the market, and license holders must conduct their activities in accordance with the law, per Ardalan Shekarabi. Operators offering to Swedish players without a license, or anyone who promotes an unlicensed service, could face fines and prison terms of up to six years depending on the intent and severity of the case.

Swedish safety remains at the heart
Sweden has firmly stood by its gambling legislation and state-owned monopoly as the best methods by which they can protect the Swedish public and Swedish society from criminal activity and gambling addiction. However, Svenska Spel was only seen to have 19.7 per cent of the market. Swedish laws did not criminalise the use of unlicensed online casinos, and the government did not block their websites. So, due to the lack of offering on Svenska Spel’s behalf, many Swedish gamers sought other websites.
As noted by the Swedish National Audit Office in 2012, the monopolised state of Sweden’s gambling market was no longer helping them to achieve their goals of protecting the public. The new legislation certainly enables Sweden to take back control and even achieve their initial goals. Shekarabi states that the new laws strengthen consumer protection while limiting the negative effects of gambling while giving the Swedish Gambling Authority an enhanced ability to punish those who are in breach of the legislation. The ban on bonus offers, bar welcome offers, is a strong display of Sweden’s desire to limit the occurrence of gambling addiction as the wagering requirements often attached make players deposit more money if they wish to earn their bonus winnings.
At the heart of Sweden’s long-fought battle to maintain its gambling monopoly was the belief that the nation was doing what was best for its residents. However, the Lotteries Act (1994) and Casinos Act (1999) were created in a time when there was much uncertainty surrounding the internet and foreign gambling while ruling in Swedish courts have been unable to apply them in a way that is acceptable in the modern age. However, Sweden has found a far more powerful method of protecting its citizens by yielding to the European Commission’s demands and enforcing a comprehensive set of policies to govern a new, liberalised gaming market in Sweden.

by Denitza Dimitrova
LL.B., LL.M., Mag.Jur.